Is this mortage fraud?

[lost in espace]

A good friend of mine is in the final prep stages of her new build house. Their existing house will be flattened and the new house built on the exact footprint of the old house.

I found out today that they have sufficient in the bank for the build and do not require any further funds in excess of their existing mortgage. They are planning on keeping the existing mortgage and were not concerned with contacting the lender (C&G in this case) to inform them of the development.

My advice was to read the small print on the mortgage contract and expect many questions from their solicitor when they remortgage or sell up.

I suspect that this may constitute mortgage fraud, or am I being overly worried for her? (No pics).

[randlemarcus]

I suspect it depends on the timing. The mortgage is secured on the deeds to the land, and the nominal value of the pile of bricks on top of it forms the LTV, no? So if C&G decided to visit right in the middle, they might be upset, but probably not so much when the new one is up (assuming they aren't doing anything silly).

I'd be tempted to get a further advance once it's done, just to see the puzzled look on the surveyors face when he drives past the two up two down on the original survey, and can only see the Disney Schloss in pink

[lost in espace]

I suppose if they needed extra funds during the build they could have problems, it was more the criminal law implications I was worried about than the lender attempting repossession. Obtaining monies by deception?

[robinhood21]

I'm no expert but, would have thought one would need to close the existing mortgage and take out a new one with the existing mortgage company. I expect they would be more than a tad miffed if they knew what was going on.

[Simpo Two]

Or you could just let them get on with it, and if it all goes pear-shaped, say 'I told you so'.

No point in fighting other people's battles if they're not interested.

Edited by Simpo Two on Thursday 28th January 19:55

[lost in espace]

Simpo Two said:

Or you could just let them get on with it, and if it all goes pear-shaped, say 'I told you so'.

No point in fighting other people's battles if they're not interested.

Edited by Simpo Two on Thursday 28th January 19:55

The wife is a lot more concerned than the husband. He had been given the task of sorting the finances, and the wife is concerned that all is not as it seemed.

[lost in espace]

There is no mention of any restrictions in the mortgage contract I have just been told so they look ok to go ahead.

[andy43]

lost in espace said:

I suppose if they needed extra funds during the build they could have problems, it was more the criminal law implications I was worried about than the lender attempting repossession. Obtaining monies by deception?

I'd like to see them repossess. No mate, the house you want is in those skips over there

[lost in espace]

The saying is that if you owe the bank £100 they own you. Owe them £1m and you own them. On this basis the bank will be keen for them to rebuild if they get found out rather than repossess. Its just not a normal way of going about this.

[mgtony]

A mortgage contract will state that you agree to keep the condition of the property to a mortgageable standard.
I would think a mortgage company could repossess or demand settlement of the mortgage balance if the terms of the contrct are broken.
If the site was flattened they could repossess it and all their savings which were put aside to rebuild it would have to be used to pay whatever was still owed on the balance.

[lost in espace]

mgtony said:

A mortgage contract will state that you agree to keep the condition of the property to a mortgageable standard.
I would think a mortgage company could repossess or demand settlement of the mortgage balance if the terms of the contrct are broken.
If the site was flattened they could repossess it and all their savings which were put aside to rebuild it would have to be used to pay whatever was still owed on the balance.

Absolutely, however the mortgage co have to find out about it I suppose. I have posted a thread elsewhere and somebody who did just this responded, they said it was hairy when the telephone staff found out but the second line staff at the mortgage co did not find this an unusual situation.

[mgtony]

Suppose it would depend on how much was owed on the mortgage in relation to the value of the property/land.

[JustinP1]

mgtony said:

A mortgage contract will state that you agree to keep the condition of the property to a mortgageable standard.
I would think a mortgage company could repossess or demand settlement of the mortgage balance if the terms of the contrct are broken.
If the site was flattened they could repossess it and all their savings which were put aside to rebuild it would have to be used to pay whatever was still owed on the balance.

Yes.

And yes again.

My mortgage contracts are clear that to make significant alterations to the property I need their permission.

Further to this, although I might have to reference case law, in a situation like this where a party has a significant vested and financial interest in something you have a duty of information.

Look at it this way - they might own the property, but the mortgage company do too! They will not take kindly to a six figure asset being flattened.

Of course the *intention* is to rebuild a house - but who is to say that the mortgage company even *want* to offer a mortgage on the new house as it stands? It is effectively a new house that the would want to survey before making a decision.

Indeed, what should happen if for any of a myriad of reasons there is problems in the new build?

What a lot of people don't realise is in the small print of mortgage contracts is the option for the mortgage company to give you two months notice to ask for their money back. No questions asked.

Of course in normal circumstances, they do not, as the regulator would rip them to pieces. But where there has been a serious breach of contract they *can* and *will* do. There was a recent case of exactly that and the homeowners (or not as the case may be) had a court case to try and stop themslves being evicted. They lost.

Basically, their mortgage stated that there should be no further charges on the property without their permission. They only had 20% equity, about £40k and had got a £50k secured loan. They got caught out when they wanted an even larger secured loan and they went back to NatWest to try and get it. Their mortgage was with NatWest too so they got found out. Given notice, and evicted. Their property was sold off and they still owed NatWest £100k.

Of course that is a serious breach, but somewhat less fundamental than knocking the whole house down.

So, tell them please not to do it unless they want to risk everything they own.

Edited by JustinP1 on Friday 29th January 10:32

[lost in espace]

Thanks for that Justin, sensible advice. The wee problem that I have is that I talk to the wife, and the husband is doing the financial planning. The last thing I want to do is to give her ammunition against the husband. I think I will just tell her that I think she should get legal advice before they proceed and save myself a kicking!

We have just done a big self build and I wouldn't fancy having this sort of thing hanging over my head, it was stressful enough!

[lost in espace]

anonymous said:

[redacted]

Land value prob £175k. House worth £300k as it stands. Finished value £550k. There should be about £100k added value at a guess.